News Column

Researchers Submit Patent Application, "Portfolio Decumulation and Risk Management", for Approval

September 4, 2014

By a News Reporter-Staff News Editor at Politics & Government Week -- From Washington, D.C., VerticalNews journalists report that a patent application by the inventors Ramkumar, Sunder Rajan (San Francisco, CA); Fredericks, Michael John (New Canaan, CT); Pensky, Michael Olegovich (New York, NY), filed on February 14, 2014, was made available online on August 21, 2014.

The patent's assignee is Blackrock Inc.

News editors obtained the following quote from the background information supplied by the inventors: "This invention relates generally to asset drawdown ('decumulation') of a portfolio, and more particularly to retirement spending planning

"Asset drawdown scenarios, such as spending during retirement, initiate periodic asset withdrawals from an account over a desired amount of time. Typical asset drawdown strategies recommend withdrawing a specific amount of assets from the account every year. For example, an advisor may suggest withdrawing a specific percentage of the original assets every year, such as 6.5% of the original value, with a target of depleting the account after 20 years. This withdrawal strategy has a significant risk of depleting assets early. In particular, since assets are typically invested with some amount of estimated risk, this strategy fails to account for changes to actual account value of investment assets over time."

As a supplement to the background information on this patent application, VerticalNews correspondents also obtained the inventors' summary information for this patent application: "An asset decumulation strategy is based on actual asset performance during the desired decumulation period and adjusts withdrawal amounts and the portfolio's risk profile accordingly. Tiered spending levels are established and selected based on actual asset performance during the decumulation period. When assets perform well, spending levels are maintained and may be increased to the next spending tier. When assets perform poorly, spending is reduced to a lower spending tier. Similarly, tiered risk levels are established. An investor is mapped into an appropriate risk level based on his objectives. If the assets perform well, the risk profile is decreased to lower tiers. This helps lock in gains and provides increased certainty of meeting the spending objective. Conversely, if the assets perform poorly, the asset risk profile is maintained as the investor needs to maintain high expected returns to achieve spending objectives.

"The asset decumulation strategy is calculated by a decumulation management system, which performs simulations to determine the likelihood of successfully decumulating assets during the desired decumulation period and generates the strategy based on these determinations. The decumulation management system may provide recommendations to a user based on the likelihoods, or may automatically manage assets to control spending levels and investment of the portfolio in assets matching the asset risk profile.


"FIG. 1 illustrates spending bands generated according to one embodiment.

"FIG. 2 shows risk bands generated for a portfolio according to one embodiment.

"FIGS. 3A-3B illustrates a user interface for interacting with a decumulation management system according to one embodiment.

"FIGS. 4A-4J show additional example user interfaces for interacting with an decumulation management system.

"FIG. 5 shows two historical scenarios managed using asset decumulation according to one embodiment.

"FIG. 6A-6C compare a constant-spending decumulation approach with one embodiment of decumulation using a decumulation management system.

"The figures depict various embodiments of the present invention for purposes of illustration only. One skilled in the art will readily recognize from the following discussion that alternative embodiments of the structures and methods illustrated herein may be employed without departing from the principles of the invention described herein."

For additional information on this patent application, see: Ramkumar, Sunder Rajan; Fredericks, Michael John; Pensky, Michael Olegovich. Portfolio Decumulation and Risk Management. Filed February 14, 2014 and posted August 21, 2014. Patent URL:

Keywords for this news article include: Blackrock Inc.

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Source: Politics & Government Week

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